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Dear Industry Colleagues,

Last month, IATA held its 75th Annual General Meeting (AGM) and World Air I recently met with key stakeholders in Peru and from the feedback I Transport Summit in Seoul hosted by Korean Air, bringing together 1,000 received it became clear that the air transport industry needs a much industry leaders. Thank you to those of you who were able to attend and stronger and more pro-active government partner to drive Peru's aviation make the trip to South Korea. All proceedings from the conference are now agenda forward. Most urgently, the government needs to work with the available via our dedicated AGM micro-site. The key takeaway of the AGM industry on the expansion of Jorge Chavez International Airport (LIM) to be was the successful endorsement of five resolutions to further shape the able to accommodate the projected 46 million passengers in 2038. There future of aviation in the areas of protecting the environment, slots, RFID for also needs to be a review of the cost structure (taxes and user fees) and Baggage Tracking, OneID and Disabled Passengers. All five resolutions will regulatory policies to comply with global industry standards. IATA impact the industry across the Americas and my team and I look forward to requested a meeting with the government to offer our support and global working with you in implementing these newest developments. For your best practices and we hope for the meeting to take place soon to address planning purposes, the 2020 edition of the AGM will take place in the LIM and Cusco region infrastructure concerns. Amsterdam, hosted by KLM in June. Lastly, I would like to encourage you to attend our two next regional events: Besides the AGM, my team has been advocating on behalf of the industry First the Wings of Change Conference in Chicago on September 3 and 4 with some positive outcomes in Brazil (allowing airlines to charge for bags and then the final Aviation Day of 2019 in On September 10. while maintaining 100% foreign ownership rights) and Colombia (fighting a bill on consumer protection and airfare regulation). IATA's Director General As usual, please find IATA’s most recent key activities across the region & CEO Alexandre de Juniac will meet with Colombian President Duque next below and please let me know if you have any questions or require further week to further express the value aviation generates for the Colombian details. Enjoy your summer! people and its economy. The goal of the meeting will be to identify ways on how the government can work even closer together with the industry to With kind regards,

ensure the right conditions are provided to prepare for the anticipated

future growth of the Colombian market. A breakdown of the latest IATA 20

year forecast for key markets in the Americas region is included in the monthly chart below. Peter Cerdá, IATA’s Regional Vice President, The Americas

FORECAST FOR AIR TRAFFIC IN THE AMERICAS

GLOBAL GROWTH FORECAST: ADDITIONAL PAX JOURNEYS PER YEAR IN 2038 VS 2018 (MILLION) & CAGR (% PER YEAR)

ARGENTINA: ANAC PLANS TO DECLARE AEP & BRC AS FACILITATED AIRPORTS—WSG LEVEL 2 In December 2018, Argentina's DGCA (ANAC) announced their intention to declare several airports in the country as airports of interest/facilitated airports and circulated a draft regulation deviating significantly from the World Slots Guidelines (WSG). IATA voiced its concern and opposition. ANAC took these comments under consideration and opened the proposed regulation to review. Upon IATA’s advice and continued guidance during several months, ANAC drafted a new regulation proposal for airport facilitation (Level 2) which more closely adheres to WSG. On June 6, ANAC presented the key elements of this new version to airlines and informed them of their plans to declare Aeroparque (AEP) and Bariloche (BRC) as airports of interest/facilitated airports. Airlines have generally provided positive comments to the development of the norm and appreciated alignment to WSG through IATA-ANAC joint efforts. Main issues to be closely monitored and that IATA continues to press: 1) ANAC has still not presented the corresponding declaration of capacity and demand analysis showing limitations that justify the need to implement facilitation procedures at AEP, 2) ANAC has declared AA2000, the Airport Operator as the facilitator for AEP during an initial period which is not ideal. For more information, please contact IATA's Senior Manager for Worldwide Slot Guidelines, Arantza Mendicoa.

BRAZIL: UPDATE ON BAGGAGE ALLOWANCE & 100% FOREIGN OWNERSHIP RULE After weeks of highlighting the possible negative implications of a free baggage allowance on the Brazilian aviation sector to key players in the government, IATA welcomed the decision by President Bolsonaro to veto Provisional Decree 863/18 which was passed by the National Congress on Wednesday, May 22, 2019. This line item veto will allow airlines to continue to offer a wider choice of baggage options so that passengers can decide which additional services they would like to pay for or not. The 100% foreign ownership rule is not affected by this veto and remains in place. This decision increases the attractiveness of the Brazilian market, closer aligning the country with global best practices. We will continue to monitor the situation closely. For more details, please contact IATA’s Country Manager for Brazil, Dany Oliveira.

COLOMBIA: CONSUMER PROTECTION BILL ON FARE REGULATION ARCHIVED The bill that proposed to impose stringent provisions on consumer protection and fare regulation in Colombia was archived as there was no consensus among Congressmen to debate it before the end of the current legislative period. However, the possibility remains that the bill will be brought back to life, this time with Government support who seeks to strengthen the newly acquired competences of the Superintendence of Transportation. IATA will continue to monitor the situation and advocate for a positive outcome for the airline industry during the next legislative period starting July 20. For more details, please contact IATA’s Country Manager for Colombia, Andres Uribe.

COLOMBIA: PLANS FOR U.S. CBP PRECLEARANCE OPERATIONS AT BOG As announced by Colombian President Duque, negotiations between the U.S. and Colombian governments are underway with the objective of signing an agreement to establish U.S. CBP Preclearance operations on Colombian territory at El Dorado International Airport (BOG). IATA convened a meeting on June 21 to discuss the pros and cons of opening a U.S. CBP Preclearance facility at BOG with the participation of government representatives from the Presidency of the Republic, Ministry of Foreign Affairs, Ministry of Transportation, Civil Aviation Authority, Immigration, Customs, National Police, National Agency of Infrastructure, Civil Aviation Authority and airlines. The meeting allowed stakeholders to share perspectives and views of the conditions by which this scheme would operate. There are still concerns and a variety of items need to be addressed, such as the carriage of firearms, applicable jurisdiction, cost assumptions and location of the facility. For more details, please contact IATA’s Manager for Security and Facilitation, Alejandro Restrepo.

CUBA: TAKEAWAYS OF AVIATION DAY & VALUE OF AVIATION STUDY IATA participated in the Cuba Aviation Day hosted by the Cuban Ministry of Tourism and the Cuban Aviation Corporation (CACSA). The event brought together over 100 high-ranking Cuban officials from the Ministry of Transport (MINTRANS), Cuba Civil Aviation Authority (IACC), Air Navigation Service Provider (ECNA), Cuban Corporation of Airport and Aeronautical Services (ECASA) among others. The event provided a platform to discuss IATA’s latest industry initiatives and how global best practices in the areas of distribution and technology, smarter regulation, airport and airspace infrastructure can benefit Cuba’s Aviation sector. IATA also used the opportunity to launch an economic study entitled “The Value of Air Transport in Cuba” which outlines the importance of aviation as an economic facilitator. For more details, please contact IATA’s Area Manager for the , Annaleen Lord. For more information, please contact IATA’s Area Manager for the Caribbean, Annaleen Lord.

GUATEMALA: BILL PRESENTED TO CONGRESS TO ESTABLISH TAX REGIME FOR AIRLINES A bill was presented in the Guatemalan Congress on June 5 to resolve the non-recognition of the use of the globally accepted cost allocation formulas to calculate the taxable income in Guatemala. The initiative, although presented by the Ministry of Finance with partial feedback from our members, still need further alignment with industry expectations. The bill seeks to provide legal certainty both for our members operating in Guatemala and for any operator interested in establishing themselves in the country through the recognition and adoption of the internationally accepted cost allocation formulas. IATA will continue to work with the local association to ensure that clear and fair rules are established for the industry in the country. For more information, please contact IATA’s Area Manager for , David Hernandez.

PERU: IATA OFFERS SUPPORT TO GOVERNMENT FOR CONSTRUCTION OF NEW CHINCHERO AIRPORT IATA issued a press release offering our support and global best practices to the Peruvian government with the construction of the new international airport in Chinchero for the Cusco region while optimizing operations at Alejandro Velasco Astete de Cusco (CUZ) during the construction period. With the right infrastructure investments, Peru has the potential to more than double its passengers over the next 20 years. But extensive work remains to be done, not only at Jorge Chávez International Airport (LIM) but also in the Cusco region as the current international airport Alejandro Velasco Astete de Cusco (CUZ) already exceeds its capacity. For details, contact IATA’s Assistant Director for Airport Development Mark Rodrigues.

URUGUAY: FUEL PRICE REDUCTION OF USD11 MILLION ANCAP, Uruguay’s national oil company, officially published the new jet fuel price (JET A1) applicable for international airlines acquiring product in the country. As a result of a series of meetings held by IATA and ALTA with ANCAP's top management over the past months and facilitated by Uruguay’s Minister of Transport, the fuel company finally reviewed their price formula which resulted in a 41% reduction in the differential charged to define the price of JET A1 in the previous year (down from Platts + 60 c/gal to Platts + 35 c/gal). The measure adopted will represent a USD11 million cost reduction for international carriers purchasing jet fuel in Uruguay. For details contact IATA's Assistant Director, Commercial Fuel, Daniel Chereau.

IATA: UPDATE ON NDC AND NEWGEN ISS ACTIVITIES IATA has been working diligently to support travel agents and airlines in the Americas with the implementation of new processes and technologies in the distribution and settlement space. Over the past months, IATA held a variety of workshops and spoke at external events to travel agents and technical experts about NDC and NewGen ISS. The feedback received has been positive and has strengthened the relationship in the region. To attend future workshops and for more details, please contact IATA's Director for Financial & Distribution Services, Alicia Lines.

State of the region: The Americas June 2019 Economy Business confidence - manufacturing PMIs GDP growth, selected countries 50=no change, seasonally adjusted 60 % change on a yr ago 2018 Q3 2018 Q4 2018 Q1 2019 United States 2.9 3.0 3.0 3.2 55 Brazil 1.1 1.3 1.1 0.5 Mexico 2.0 2.5 1.6 0.1 Canada 1.9 2.0 1.6 1.3 50 Argentina -2.5 -3.7 -6.1 -5.8 Colombia 2.6 2.6 2.7 2.3 45 Chile 4.0 2.8 3.3 1.9

Peru 4.0 2.5 4.7 2.3 40 World* 3.2 3.1 2.9 2.9 2013 2014 2015 2016 2017 2018 2019 Brazil Mexico US † Source: Datastream * Market exchange rate basis Estimate Source: Markit Exchange rates • Political uncertainty and a slowing economy weighed end of period, # per US$ 2018 Mar-19 Apr-19 May-19 upon business confidence in Brazil, while escalating US$ broad index 128.5 127.2 127.4 128.7 US-China trade tensions contributed to the fall in Brazilian real (BRL) 3.88 3.89 3.95 3.91 sentiment in the US. In Mexico, the manufacturing PMI Mexican peso (MXN) 19.69 19.40 19.02 19.61 remained generally unchanged from April. Argentine peso (ARS) 37.66 43.41 44.03 44.83 Colombian peso (COP) 3248 3185 3236 3370 • On a trade-weighted basis, the US$ rose by 1.1%, in Chilean peso (CLP) 694 680 680 707 May, its 4th consecutive monthly increase. Most of the

Source: Datastream key regional currencies lost against the US$ with the World oil and jet fuel price exception of the BRL which gained a modest 0.9% after US$/barrel (period ave.) 2018 Mar-19 Apr-19 May-19 a sharp fall in the middle of the month. Crude oil (Brent) 71.7 66.9 71.5 70.4 • Brent crude oil and jet fuel prices lost their strong Jet fuel 86.4 81.1 84.2 84.4 upward momentum at the end of May as escalating US- Source: Platts, Datastream (monthly average data) China trade tensions reinforced concerns over a slowdown in global oil demand.

Market robust trend in the year-on-year growth rate. Revenue passenger kilometers (RPKs) • Growth in RPKs eased to 4.1% in the US domestic % change on a yr ago 2018 Feb-19 Mar-19 Apr-19 market but remains underpinned by solid economic Region (registration basis) backdrop and household spending. For Brazil, annual N America 5.0 3.7 5.0 4.4 growth slipped to just 0.6% this month, partly reflecting Latin America 6.2 5.3 5.3 5.7 the country’s weaker economic conditions. World 6.5 5.1 3.1 4.3 Routes (segment basis) • Of the region’s larger international markets, RPK US domestic 5.1 3.6 6.3 4.1 growth picked-up sharply in NthAm-Europe (7.4%yoy) Brazil domestic 4.8 5.8 3.2 0.6 and returned to positive territory for NthAm-Asia. Nth America-Europe 4.4 9.4 3.3 7.4 • The story is less positive for the smaller markets, with Nth America-Asia 3.9 -0.5 -0.6 3.1 volumes down by ~2% vs last year for Nth-SthAm & Nth-Sth America 4.6 -0.6 0.7 -2.1 Sth America-Europe 9.3 5.2 6.7 6.8 Within SthAm. Within Sth America 0.6 2.5 2.1 -1.8 Growth in air passenger volumes Source: IATA Statistics Note: historical data may be subject to revision RPKs, % Growth year-on-year • Annual growth in industry-wide revenue passenger 15% kilometres (RPKs) recovered to 4.3% in April, up from 12% 3.1% in the previous month. The pace of demand 9%

growth remains steady but is well below the long-run 6%

average of around 5%. 3%

• Year-on-year RPK growth eased to 4.4% for North 0%

American carriers in April but remains broadly in line -3% with its 5-year average pace. With passenger volumes 2013 2014 2015 2016 2017 2018 2019 up 5.7% vs last year, Lat.Am sustained a generally Latin America Total Industry Source: IATA Statistics IATA Economics: www.iata.org/economics All use of this report is subject to the Terms & Conditions of Use available here

Freight tonne kilometers (FTKs) % change on a yr ago 2018 Feb-19 Mar-19 Apr-19 • Latin America was the best performing region in terms Region (registration basis) of freight demand in April, posting a ten-month high Nth America 6.7 -1.7 -0.1 0.1 year-on-year growth rate of 5.0%. Latin America 5.9 2.8 3.9 5.0 • All of the key international markets recorded a fall in World 3.5 -5.1 -0.5 -4.7 Routes (segment basis) FTKs vs a year ago. The decline was most notable for Nth America-Asia 3.7 -7.5 -1.1 -7.9 the smaller Within SthAm market (-16%y-o-y) and the Nth America-Europe 3.2 -0.1 -0.3 -7.3 largest NthAm-Asia market (-8%y-o-y). Nth-Sth America 8.7 -2.4 -6.5 -2.2 Growth in air freight volumes Sth America-Europe 7.7 -0.2 1.6 -1.5 FTKs, % Growth year-on-year Within Sth America 17.2 10.4 10.1 -16.3 (15.9%) 15% Source: IATA Statistics Note: historical data may be subject to revision 10%

• Industry-wide FTK growth declined again in April, 5% remaining in negative territory for the sixth consecutive 0% month. Air freight volumes are currently 4.7% lower -5% than their year-ago level. -10% • FTK growth for NthAm carriers remained close to zero -15% for the second consecutive month despite the solid 2013 2014 2015 2016 2017 2018 2019 economic performance in the US. More headwinds to Latin America North America Total Industry freight demand are likely to appear if the recent Source: IATA Statistics escalation in the US-China trade war continues.

Industry • The latest financial data for Q1 2019 confirm a decline Capacity growth and load factors in industry profitability vs the same period a year ago; ASK/AFTK: % ch on a yr ago, the EBIT margin fell to 2.3%, from 4.2% in Q1 2018. At 2018 Feb-19 Mar-19 Apr-19 LF: % of ASK/AFTK the regional level, the EBIT margin remained generally Passenger unchanged for NthAm carriers at 6.5% of revenues and Nth America ASK 4.7 3.7 5.2 3.4 dipped sharply, by ~4ppt, for Lat.Am airlines. PLF 83.8 80.4 84.9 83.9 • Growth in passenger yields remained under downward Latin America ASK 6.6 5.5 4.8 4.7 PLF 81.5 81.5 81.6 82.2 pressure on all of the main regional routes in April. World ASK 6.1 5.2 4.2 3.6 SthAm-Europe was the key underperformer with yields PLF 81.9 80.6 81.8 82.8 down more than 20%, followed by SthAm-Asia (-12.6%) Freight and NthAm-SthAm (-9.2%). Nth America AFTK 6.5 0.9 2.0 2.5 Passenger yields (US$, excl. surcharges & ancillaries) FLF 41.2 39.9 41.6 40.5 Latin America AFTK 3.2 11.7 17.2 18.7 % change on a yr ago 2018 Feb-19 Mar-19 Apr-19 FLF 34.0 30.3 32.3 32.5 Nth America-Europe 4.5 -5.8 -5.3 -7.9 World AFTK 5.1 2.7 2.9 2.6 Nth America-Asia -0.3 1.7 -0.6 -7.2 FLF 49.1 44.5 49.4 46.3 Nth-Sth America -38.8 -14.9 -9.5 -9.2 Sth America-Europe -1.2 -17.7 -18.4 -20.2 Source: IATA Statistics. Note: LF=load factor. ASK=available seat kilometers. AFTK=available freight tonne kilometers Sth America-Asia -0.3 -5.0 -11.9 -12.6 • Industry-wide passenger load factor (PLF) picked-up to Within Sth America -26.9 -27.3 -9.9 -1.4 82.8%, a record high outcome for the month of April. By Source: IATA Travel Intelligence Note: historical data may be subject to revision contrast, the freight load factor (FLF) eased to 46.3%, • The latest data indicate a rise in jet aircraft deliveries for following a strong performance in March (49.4%). the Lat.Am and unchanged deliveries for NthAm carriers in 2019 vs 2018. • Both NthAm and Lat.Am carriers posted a record high PLF for April (based on data since 1990). By contrast, Aircraft deliveries to the Americas (2Q19 data) # deliveries made & due FLFs are currently lower compared to last year for both 400 NthAm

350 regions, most notably in the Lat.Am case (down 4.3ppt). 62 53 300 61

Airline operating (EBIT) margins* 250

200 % revenues 2016 2017 2018Q1 2019Q1 Lat.Am 150 301 287 278 Nth America 13.7 11.2 6.4 6.5 10 100 8 Latin America 5.6 6.2 4.9 0.7 9 50 78 97 Industry 8.5 7.5 4.2 2.3 48 0 Source: Airline Analyst * constant sample basis, not seasonally adjusted 2017 2018 2019 2017 2018 2019 Narrowbody Widebody Source: Ascend

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